LivingSocial’s Amazon.com Deal Catapults Group Buying Site into National Spotlight 5

While Groupon is practically a household name at this point, we learned today that other group buying sites are not content to sit in the background.

LivingSocial, a group buying site with national reach, today launched an unprecedented deal. It’s not the discount that was amazing, it was the place: Amazon.com.

As of 4:45pm ET, over 823,000 people had purchased the deal, which was $10 for a $20 Amazon.com gift card. Buyers were limited to one gift card each. The deal has certainly given LivingSocial significant publicity and put Groupon on notice: there are two big group buying site now.

What’s really interesting about this deal is is the fine print: “Amazon.com is not a sponsor of this promotion.” LivingSocial purchased these gift cards directly from Amazon.com, and is now selling them on their own. Clair Cain Miller at the New York Times has more details:

LivingSocial’s Amazon discount has an unusual wrinkle. Unlike with other deals, LivingSocial might be losing money selling the Amazon coupons.

Typically, retailers sell the coupons directly to consumers for the discounted price, and LivingSocial takes a cut, generally 30 percent. But for this deal, LivingSocial bought the gift cards from Amazon and is selling them itself.

LivingSocial declined to say how much it paid Amazon for the gift cards. Amazon also said it would not disclose the terms of the deal.

If LivingSocial paid Amazon $20, then LivingSocial is absorbing the losses. If it paid Amazon less, then Amazon is losing money.

It should also be noted that Amazon.com recently invested $175 million in LivingSocial.

1)It gets people in the door and signed up for LivingSocial accounts. Thus their mailing list expands and they’ve got hundreds of thousands of people now hearing about their deals.

2)As Ben mentions, it sets up LivingSocial as a company that at least appears to have access to partnerships that Groupon doesn’t. A great show-not-tell way of proving to customers that LivingSocial has deals that are worth their time – since they’ve already bought from it!

Not only that, but it might get people who don’t usually spend time on group buying websites to look into it – although I don’t usually have much interest in group buying, I spend enough on Amazon that I’d look into it for the chance to get a discounted gift card. Then I might come back, or at least keep it in mind as a place with good offers.